The administrator of BP Plc's $20 billion fund to compensate victims of the Gulf oil spill is not independent and the oil company must refrain from calling him "neutral," a federal judge ruled on Wednesday.
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Judge Carl Barbier also ruled that BP must disclose in all communications that the Gulf Coast Claims Facility (GCCF) and its administrator, Kenneth Feinberg, are acting on behalf of BP in fulfilling its legal obligations under the Oil Pollution Act.
"While BP may have delegated to Mr. Feinberg and the GCCF independence in the evaluation and payment of individual claims, many other facts support a finding that the GCCF and Mr. Feinberg are not completely 'neutral' or independent from BP," said the New Orleans federal judge in his 15-page ruling.
BP said the claims facility will "immediately implement those provisions of the order which are not already part of the GCCF's procedures."
A spokeswoman for Feinberg declined to comment beyond saying the fund would continue to pay claims.
At Feinberg's frequent town hall meetings along the Gulf Coast, he reminds potential claimants that they do not need a lawyer to take their claim to his fund.
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He has argued that his fund will pay sooner and more generously than federal courts, and he and BP both regularly describe him and the fund as "neutral" or "independent."
So far, about 87,000 have accepted a settlement of their claims. Each one of those settlements comes with an agreement not to sue, potentially chipping away at the number of lawsuits.
Barbier ruled that BP must tell claimants they have the right to consult an attorney and explain they have the right to join the hundreds of pending lawsuits if they do not accept a final settlement.
The judge also said the court may take action to cure miscommunication, and an attorney representing spill claimants said that could lead to those 87,000 settlements being re-examined.
"It's not a can of worms. It's a 55-gallon drum of worms," said Kevin Dean of the Motley Rice law firm in South Carolina. He said his firm would immediately begin contacting clients who had accepted settlements with Feinberg's fund to "tell them of their rights."
Mike Steenson, a professor at William Mitchell College of Law in St. Paul, Minnesota, said the judge appeared to stop short of ordering all settlements to be revisited.
"Even if claims are reopened it doesn't mean that people who have settled would reject an acceptable settlement," Steenson said.
The fund was set up last year at the urging of the White House after millions of barrels of oil poured into the Gulf following an explosion on a BP rig. The spill damaged the fragile wetlands of Louisiana and hit fishing and tourism businesses in Mississippi, Alabama and Florida.
The fund has so far disbursed around $3.5 billion.
The ruling comes just hours after Feinberg unveiled his proposals for final settlements of claims caused by the spill, the largest in U.S. history.
The case is In re Oil Spill, U.S. District Court, Eastern District of Louisiana, No. 10-MDL-2179. (Reporting by Tom Hals; Editing by Vinu Pilakkott)